Off-Topic: The problem is the promises

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	Name:	MartiniMan -
	Subject:	The problem is the promises
	Date:	7/7/2009 1:19:08 PM

Hound: Maybe you never believed the stimulus bill would create jobs but it was sold as a jobs creation bill by Obama and the Democrats in Congress. That is why not one Republican in the House signed on and why they could only gather up a handful of RINOs in the Senate.

What is even more mystifying to me is how could anyone support adding hundreds of billions of dollars to our deficit for no discernible return on that investment. I think you are completely correct about the relationship between consumer confidence and jobs but you are missing another factor that belies the general pessimism about our economy and the steps being taken by the Obama administration to allegedly rectify it. That is the dramatic increase in the savings rate.

I read recently that the savings rate in the U.S. has risen to over 7%. On the one hand it is a good thing that Americans are doing some balance sheet repair but the problem is they are responding to their loss in net worth resulting from a reduction in home values, 401k/IRA's and stock accounts. This dramatic increase in the savings rate becomes a downward spiral because by removing that much spending from the economy over a very short timeframe they will only further erode consumer confidence and jobs thereby further eroding consumer balance sheets causing them to save more. This is exactly the problem that plagued Japan and caused them to experience a 10 year recession when the U.S. recovered more quickly.